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Determining the present value of bonds payable Interest rates determine the present value of future amounts

Question: Determining the present value of bonds payable

Interest rates determine the present value of future amounts. (Round to the nearest

dollar.)

Requirements

1. Determine the present value of 10-year bonds payable with face value of $86,000

and stated interest rate of 14%, paid semiannually. The market rate of interest is

14% at issuance.

2. Same bonds payable as in Requirement 1, but the market interest rate is 16%.

3. Same bonds payable as in Requirement 1, but the market interest rate is 12%.

Expert Solution

Step 1: Definition of bonds

A bond is a long-term liability that a company issues with borrowing a large amount of money. The bonds are issued by the company to fulfill the need of the xash. In this question the present value of the bonds is calculated.

Step 2: Calculation of the present value of bonds

In this, we take n= 20 and i=7%

2)

3)

The present value of the bonds is $77,557

Sahil Dangi answered 2 years ago

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